Kenneth Rogoff: belief

Transcript context

…Right, because that’s credible. Whether you like them or not, they’ve all stuck, right? You can do it. It has its costs. The biggest cost is if your banking system runs into trouble, you can’t bail them out. In most countries, the currency that we think of, the physical currency, is just a little piece of the animal. A lot of it — you might not think of your checking account or your savings account as dollars, but they are. That’s a lot of the money supply. When you say they’re just using real dollars, they don’t have real dollars to back those bank accounts. It can work, but you run into banking crises, you run into debt crises, and then when you’re dollarized, it’s hard to fight it. It’s doable. It’s absolutely doable, but I’m not sure necessarily it’s advisable. It depends on the alternative. If the country’s been run into the ground for 50 years and you’re trying to reclaim territory, it makes sense. Why isn’t it easy for a lot of countries? Say you’re Barbados. That’s a small country. Most of your visitors are from the US also. Your banking system — you can just buy external insurance. There’s an insurer that can cover the Barbados banking system if need be. Buy it from China if you have to, and then just dollarize. Why aren’t they just better off?…

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